Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 18

Notes payable-discount basis On April 15, 2016, Powell, Inc., obtained a six month working capital loan from its bank. The face amount of the note signed by the treasurer was $1,200,000. The interest rate charged by the bank was 9%. The bank made the loan on a discount basis.
Required:
a. Calculate the loan proceeds made available to Powell, and use the horizontal model (or write the journal entry) to show the effect of signing the note and the receipt of the cash proceeds on April 15, 2016.
b. Calculate the amount of interest expense applicable to this loan during the fiscal year ended June 30, 2016.
c. What is the amount of the current liability related to this loan to be shown in the June 30, 2016, balance sheet?